Site Mobile Navigation

Some Winners Emerge From Europe’s Debt Crisis

FRANKFURT — Don’t say it too loudly, but for some European businesses, the sovereign debt crisis is not so bad. Assuming that the turmoil does not destroy the euro zone, there are some positive side effects, including a falling currency and extraordinarily low official interest rates.

Siemens, the electronics and engineering company based in Munich, is one example. With 18 percent of its sales in Asia, and an additional 27 percent in the United States, Canada and Latin America, the company is in a good position to profit from recovering demand in those regions for Siemens products like high-speed trains, wind generators and factory equipment.

In April, while European Union political leaders struggled to contain the continental debt crisis, Siemens raised its forecast for 2010 operating profit to €7.5 billion, or $9.3 billion, from €6.5 billion. “One can’t ignore the sovereign debt problems, but it hasn’t affected our business,” Peter Y. Solmssen, a member of Siemens’ management board who is responsible for its U.S. operations, said during an interview Friday.

While Germans have complained the loudest about having to bail out Greece and the other overindebted nations, Germany is arguably the big winner from the financial crisis in the form of lower interest rates and a more robust stock market.

One risk of the current crisis is that it will create a sharper divide between poorer Southern Europe and prosperous Northern Europe, adding to tensions about how to manage the euro-zone economy. Mr. Solmssen of Siemens, and others, note that they would definitely not want to see the euro zone disintegrate, because the common currency makes it easier to do business.

For many companies in Europe, the debt problems of Greece or Portugal are little more than a distraction. Greece, which accounts for 2.5 percent of the gross national product in the euro zone, is not an important market for most large multinationals. The gyrations of bond markets have little daily effect in a region where banks are still the most important source of credit for smaller companies. Most executives worry more about the European export numbers, which have been improving.

“There is a considerable mismatch between the financial world and the real economy,” said Ben Noteboom, chief executive of Randstad, a temporary staffing company based in Amsterdam.

Some types of companies even profit from the crisis. Hedge funds, which can exploit market volatility, have recouped most of their losses from the end of 2007, the European Central Bank noted in a recent report.

Randstad is another example of a company that may be benefiting from the crisis, though Mr. Noteboom does not say that. Though Randstad’s revenue fell sharply in some markets during the downturn last year, demand has begun recovering strongly, Mr. Noteboom said. Companies may be more willing to hire temporary workers than permanent workers in the first stages of a recovery, when executives are still uncertain about the strength of the economy.

Mr. Noteboom sees Randstad as something of a barometer of where the macroeconomy is going. If so, the signs are good. The overall market for temporary workers is up by 10 percent or more in Germany, France and Belgium, and nearly that much in the Netherlands, Mr. Noteboom said. He said he had even seen growth in Greece, though from a low level. “I’m optimistic,” Mr. Noteboom said. “Almost very optimistic.”

To profit from the sovereign debt crisis, it helps not to be a bank. Even the institutions that are not sitting on big portfolios of Greek or Portuguese bonds face stricter government oversight in years to come. Analysts say the regulations could put an end to the double-digit profit margins banks enjoyed before the financial crisis.

It also helps if your company headquarters is in a country with a Baltic rather than a Mediterranean coastline. The cost of credit has soared in countries like Spain, because the interest rates that companies pay on loans is closely tied to the rates that their governments pay. Chalk up another competitive disadvantage for companies doing business in the so-called peripheral countries.

But for Germany and other countries in Northern Europe, the crisis has brought lower interest rates. German bonds are considered a haven from the turmoil in sovereign debt markets. That means German companies are also paying lower risk premiums.

One business, the German rental car company Sixt, even raised €300 million late last year and made a profit reinvesting the proceeds in bonds of other corporations. Sixt will use the money to refinance existing debt, a spokesman said.

An error has occurred. Please try again later.

You are already subscribed to this email.

More than their counterparts in Greece or even France, German companies are able to collect the full benefit of the European Central Bank’s historically low benchmark interest rate of 1 percent.

And the easy-money party is likely to last for many months to come. Many analysts don’t expect the E.C.B. to begin raising rates until mid-2011, as the bank struggles to cope with the debt crisis.

“The expectations for a rate hike have been pushed further and further back,” said Britta Weidenbach, senior fund manager for European equities at DWS, the fund management arm of Deutsche Bank in Frankfurt. That definitely has a positive side.”

The DAX 30-share index in Frankfurt has risen 4.65 percent this year, more than the French benchmark index or the broader Euro Stoxx 50 index.

The gains reflect the presence of exporters like Siemens as well as MAN, a maker of trucks; or Bayerische Motoren Werke, the maker of BMW cars; or SAP, which sells software used by companies to run their operations. All have benefited from the 15 percent decline in the euro this year against the dollar, which makes sales in the United States more profitable when converted back into the European currency.

The decline in the euro was prompted by the problems of Greece, Spain and Portugal, which will also benefit. But they will not gain as much as the northern countries, according to a Citigroup analysis. “Our economists expect ongoing economic underperformance from Southern Europe relative to Northern Europe over the coming quarters and years,” analysts at Citigroup Global Markets wrote in a report last week.

Another company shrugging off the crisis is the German sports apparel maker Adidas, and not just because of its ties to the soccer World Cup in South Africa. The improving U.S. market has helped sales of Adidas’ Reebok unit, while growth in emerging markets like Russia is more than compensating for slower European sales.

Outside Germany, companies like the Dutch electronics maker Philips or Scandinavian companies like Volvo, which makes Mack trucks, are also among the beneficiaries of demand from China and other emerging markets. Volvo, which is separate from the maker of Volvo cars, said Wednesday that deliveries were up 44 percent in May from a year earlier.

At Siemens, overall revenue fell 4 percent from January through March, to €18.2 billion. But Mr. Solmssen said there were clear signs of recovery, including new orders for factory equipment, a category that contracted in the downturn.

“Even in some of the more stricken industries, like the auto industry, are starting to order again,” Mr. Solmssen said. “Across the board we’re seeing improvement.”

Even the oil spill in the Gulf of Mexico has an upside for Siemens. The BP disaster may hurt Siemens’ business providing services to the oil industry. But the loss may be more than offset by stronger demand for gas turbines, wind generators, and equipment to make power grids function more efficiently.

At a factory in Fort Madison, Iowa, which received a visit from President Barack Obama in April, Siemens is producing 36 giant rotor blades a week to meet demand. The company is anticipating more sales as political pressure grows in the U.S. for alternatives to oil.

“I think you’re going to see an increased emphasis on that kind of technology,” Mr. Solmssen said.

A version of this article appears in print on June 21, 2010, on Page B3 of the New York edition with the headline: Debt Crisis In Europe Not All Bad. Order Reprints|Today's Paper|Subscribe